Entrepreneurial Spirit Runs Counter to Plan
Participation

April 24, 2001 (PLANSPONSOR.com) - The same factors
that encourage small business owners to become entrepreneurs
also tend to discourage participation in retirement plans -
and might tend to discourage establishing those plans for
others.

According to the study by the Department of Consumer
Sciences and Retailing at Purdue University, wage earner
participation in a retirement plan was predicted by:

being older

having some college education or a bachelors
degree

working full time

working for a larger firm

having a good idea of next year’s income

The study found that the factors that influenced the
decision to be self-employed were also likely to decrease
participation in plans, although it is possible that the
self-employed are planning for retirement through other
means such as investments in their businesses.

An alternative explanation could be that they plan to
work indefinitely and have therefore delayed retirement
planning.

In Common

However, the study also found that some of the
determinants of participation were comparable for both wage
earners and the self-employed.

These included:

higher income

a graduate education

being white

the belief that past income had outpaced
inflation

The only other factor predicting plan participation for
the self-employed was the expectation that future income
would increase more than prices would.

No Plans

In addition, the research found that small employers who
do not offer retirement plans have:

lower revenues

younger employees

employees who earn lower salaries

employees with less formal education

employees who tend to work short term

While those wage earners who do not participate in
retirement plans are generally:

younger workers

non- white

those with lower incomes

less educated

part-time workers

those who work for smaller firms

Many of these wage earners may not be eligible for
retirement plans because they have not worked long enough,
or they may be eligible but are not participating, or are
employed at a firm that does not provided a retirement
plan.